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Best Stocks of the Week: REITs Rebound

The S&P 500 index rose last week for the fifth consecutive week, 0.8% to 4,568 points. The November rally has brought the benchmark index closer to its all-time high of 4,797 recorded on January 3, 2022. The other major indices also rose last week, as the Dow Jones Industrial Average gained 2.4% and the Nasdaq Composite rose 0.4%. The S&P 500 is approaching the bullish zone, up 19.7% so far this year, while the Dow is up 9.4% and the Nasdaq is up 36.7%.

Although earnings season is coming to a close, a pair of strong earnings reports and some positive comments from the Federal Reserve boosted the three major stocks in the S&P 500 last week.

1 . Boston Properties rises 17.8%

Boston Properties (NYSE:BXP) is a real estate investment trust (REIT) specialized in commercial real estate and, more specifically, office buildings. It is the largest publicly traded office REIT in the country, with properties in major cities such as Boston, Los Angeles, New York, Seattle, San Francisco and Washington, D.C. Needless to say, the commercial real estate market has been extremely difficult for many reasons, including high interest rates.

Last week’s rally came mostly on Friday, as stocks gained about 12% of their 17.8% weekly gain on that day alone. The main catalyst was probably the speech given by Fed Chairman Jerome Powell at Spelman College in Atlanta. Powell delivered what the market perceived as positive comments about the direction of inflation and the Fed’s strategy to reduce it, fueling further speculation that the rate-tightening cycle may be over.

Specifically, Powell told the audience that core inflation has been at 2.5% over the past six months and that the “lower inflation readings in recent months are welcome.” There may be no segment of the market that welcomes lower rates better than the battered commercial real estate sector; hence the rise of Boston Properties and other office REITs.

2 . NetApp increases 16.5%

NetApp (NASDAQ:NTAP), a provider of data storage and cloud services, soared 16.5% last week, with most of the gains coming after it reported its fiscal second-quarter earnings on Dec. 28. November. Although its quarterly profits fell 6% year-on-year to $1.56 billion, they exceeded the upper limit of the company’s mid-year forecasts. The public cloud business segment was the top performer, with revenue increasing 8.5% year-over-year and an annualized revenue rate of $609 million, up 1% year-over-year.

NetApp’s non-GAAP operating margin also hit a record 27% in the quarter, while its non-GAAP consolidated gross margin also set a record 72%. For fiscal 2024, the company’s operating margin is expected to be 26%, while gross margin is projected at 71%.

For the third quarter, NetApp forecast earnings per share (EPS) of between $1.17 and $1.27, up from $1.10 in the second quarter, while for the full year, the company expects EPS of between $4.15 and $4.35, respectively. above previous forecasts.

NetApp received several analyst upgrades last week after reporting earnings. Bank of America, Morgan Stanley, TD Cowen, Wells Fargo, Barclays and Evercore ISI were among those who raised their price targets.

3. Salesforce grows 15.9%

The third most bullish stock of the week was Salesforce (NYSE:CRM), which rose 15.9%. Like NetApp, the main catalyst for Salesforce, a provider of customer relationship management software for businesses, was its earnings report. Salesforce released its third-quarter earnings on Wednesday, and the results were better than analysts expected.

Salesforce’s revenue rose 11% to $8.7 billion in the quarter, while its net income was $1.2 billion, or $1.26 per share, up from $210 million a year ago. Salesforce has seen success in the last year, integrating AI (artificial intelligence) CRM into a single platform.

“Over the past year we have transformed the company, enabling us to deliver another quarter of strong profitable growth with a GAAP operating margin of 17.2% and a non-GAAP operating margin of 31.2%,” said Amy Weaver, president and chief financial officer. from Salesforce.

The market also reacted favorably to the company’s fiscal 2024 guidance, which pointed to 11% revenue growth and EPS of $3.99 to $4 per share, higher than previously forecast.

Conclusions

Please note that these are weekly snapshots, so each value should be examined in more detail. Of the three, Boston Properties is the weakest, as the commercial real estate market has yet to recover and the jump was more speculative.

NetApp and Salesforce are certainly stocks worth delving into, with NetApp having the most favorable valuation. Meanwhile, Salesforce has seen huge growth, but it also has a sky-high valuation.

Source: Fx Street

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